PR102203

Banks Ride ARC to Record Wave of ACH Payments

NACHA Reports More Than 12 Billion ACH Payments in 2004

San Antonio, Texas, April 11, 2005 – More than 12 billion automated clearing house (ACH) payments were made in 2004, a 20 percent increase over 2003, according to statistics released today by NACHA - The Electronic Payments Association at its PAYMENTS 2005 conference. The growth was largely driven by the rapid expansion of ARC - the accounts receivable check conversion application - which experienced a nearly six-fold increase in volume to more than 1.25 billion payments.

"The tremendous growth in ACH payments is the result of the substantial benefits that consumers, companies and financial institutions receive when moving from manual, paper-intensive processes to electronic payment processes," said Steve Ellis, Chairman of NACHA and Executive Vice President of Wells Fargo & Company's Wholesale Banking Group.

The nation's financial institutions originated 21.6 percent more ACH payments than in 2003, the industry's best performance since 1991 when Direct Deposit was first being promoted nationwide. The number of these payments was 11.06 billion, a jump of nearly 2 billion over 2003, and valued at $25.5 trillion. The remainder were originated by the Federal government - 952 million ACH payments in 2004, up 3.0 percent, and valued at $3.1 trillion.

ACH payments include Direct Deposit of payroll, Social Security benefits and tax refunds, Direct Payment of consumer bills, e-checks, business-to-business payments, and Federal tax withholdings. The nation's financial institutions and its customers experience billions of dollars in benefits annually due to ACH payments.

Annual ARC volume grew by more than 1 billion payments, and accounted for 54 percent of all ACH transaction growth in 2004. In just its third year in the marketplace, ARC has surpassed the 1-billion-payments-threshold faster than any other payment application in the 33-year history of the ACH Network.

Internet-initiated ACH payments represented a second area of growth. In 2004 American consumers initiated 967 million ACH debit payments via the Internet (known as WEB), valued at over $300 billion, and a 40.4 percent increase over 2003. NACHA estimates that 80 percent of these debits are to pay bills via companies' or billing services' web sites, 18 percent are to transfer funds, and 1 percent are to make purchases. In addition, Americans initiated 115 million ACH credit payments, valued at $47.8 billion, via their financial institutions' or billing services' web sites. Combining these two methods shows that U.S. consumers used the Internet to initiate more than 1 billion ACH payments valued at $350 billion.

"Banks themselves are the largest users of ARC and WEB payments to collect bill payments, such as credit cards, mortgages, and other loans, from their customers," said Ellis. "This provides the banking industry with a double benefit - replacing checks with electronic payments and improving the collection of their own receivables."

For a case study of one bank's use of ACH payments to service its own portfolio of consumer bill payments, see NACHA's news release of today, Citigroup Boards the ARC, Receives NACHA's 2005 Payments System Excellence Award.

Direct Deposit is still the most widely used ACH payment. The number of Direct Deposits in 2004 increased by 5.3 percent to more than 4.2 billion payments. Direct Deposit is used for payroll, expense and travel reimbursement, pension and annuity payments, interest payments, retirement and mutual fund distributions, Social Security, Veterans and other government benefits, and tax refunds. The average dollar amount of a Direct Deposit was $1,263. NACHA estimates that more than 71 percent of the private-sector workforce in the U.S. uses Direct Deposit to get paid.

The number of Direct Payments in 2004 increased by 6.7 percent to 3.0 billion payments. A Direct Payment is a pre-authorized debit that uses the ACH Network, and is typically used for recurring consumer bills such as mortgages, loans, utilities, investments and charitable contributions. The average dollar value of a Direct Payment was $759.

Financial EDI and B2B Payments

Financial electronic data interchange (EDI) on the ACH Network grew by 21.6 percent in 2004. In 2004 there were 764 million EDI-formatted remittance records accompanying ACH payments. Financial EDI is the electronic exchange of payments, payment-related information or financial-related documents in standard formats between business partners. The number of financial EDI payments was 213 million in 2004, up 17.1 percent over 2003.

The total number of business-to-business ACH payments grew to 1.8 billion in 2004, up 8.9 percent over 2003. These payments include payments among trading partners, intra-company cash management transfers, government vendor payments, as well as business-to-government tax withholdings. The dollar value of these payments was $19.9 trillion, accounting for 69 percent of all ACH payment dollars.

ACH Volume (in millions)
	2004	2003	% Increase
Commercial
Inter-bank	8,174	6,607	23.7
On-US	2,884	2,485	16.0
Commercial Total	11,057	9,092	21.6
Federal Government	951	924	3.0
Total	12,009	10,017	19.9

NACHA is the leading organization in developing electronic solutions to improve the payments system. NACHA represents more than 11,000 financial institutions through direct memberships and a network of regional payments associations, and 650 organizations through its industry councils. NACHA develops operating rules and business practices for the Automated Clearing House (ACH) Network and for electronic payments in the areas of Internet commerce, electronic bill and invoice presentment and payment (EBPP, EIPP), e-checks, financial electronic data interchange (EDI), international payments, and electronic benefits transfer (EBT). Visit NACHA on the Internet at www.nacha.org.